The Chartered Institute of Taxation (CIOT) is to be commended for its fine work in gathering industry feedback about the current HMRC compliance checks process as a result of recent changes. I had personally just finished writing an appeal letter for a very unfairly rejected claim and found the letter resonated deeply with my own and my clients feelings on the matters.
A blog can be found here from the CIOT on the letter.
And the full letter can be seen below.
Background
R&D claims used to be examined at enquiry by R&D specialist units. They were in my view tough, thorough, but fair and professional. A fundamental problem with the BEIS Guidelines which govern R&D qualification is that parts of them are subjective. Reasonable people can disagree, but in generally under the units reasonable people could also agree. Good consultants working with good inspectors could find a fair middle ground. Engagement through meetings was essential to this, and also invaluable to anyone seeking to learn more about the R&D schemes and their strengths and weaknesses. The enquiry approach was codified in a set of Guidelines for inspectors that set out clear responsibilities. These gave all involved assurance that claims would be treated fairly. It was viewed as important for claimants that they could have confidence in the schemes and invest in R&D on the basis that the schemes were practical and fair. Investing in R&D is a key strand of any good Governments economic policy. The units and the Guidelines were created because it was acknowledged before their existence that HMRC were in some cases getting things wrong.
At some point last year it was decided by HMRC to regress in the name of increased inefficiency. To be frank this has created a mess and massive doubt and uncertainty. It has reached a point where again the schemes have become unworkable. “Volume compliance” does not work when looking at complex issues.
The CIOT absolutely describe the issues I have faced and I have seen clients face. I have two clients with patents whose single patented projects are being viciously attacked, dismissed, and demeaned. The government's own site on patents states:
What you can patent
Your invention must be:
- new – it must not have been made publicly available anywhere in the world, for example it must not be described in a publication
- inventive – for example, it cannot be an obvious change to something that already exists
- either something that can be made and used, a technical process, or a method of doing something
Yet HMRC are arguing against these patented projects in every conceivable way, including rejecting all the propositions above required to get a patent. This is a clear example of how wrong and bad things have got.
Hopefully, HMRC will adjust. It is probably a resource issue so the Government is equally to blame. The government has been an absolute mess in the last year.
I would urge anyone affected by these issues to read the CIOT letter, congratulate them for excellent work, and if you are unhappy with your treatment by HMRC on an R&D claim to fight it, complain, and lobby your MP for change. If the situation does not change untold damage will be done to the UK economy. I am already hearing reports of companies either leaving the UK, or even going bust as a result of HMRCs change in approach and interpretation of R&D qualification. This damaging ill considered change must end. The UK economy is too weak for stupid self inflicted wounds and I am hearing stories about how much friendlier and fairer the Irish R&D scheme is for example. Our politicians must not drop the ball on this issue.
Christopher Toms – Compliance Director RandDTax